Opening up mortgages to people with lower credit scores doesn't necessarily mean another 2008-style housing bubble will develop. The Urban Institute hasthat while the total risk in the housing market grew considerably in the lead-up to 2007, most of that frothy activity was driven by banks developing risky loan products rather than a stark change in the quality of the borrowers themselves.
"If we do not address this intrinsic cyclicality, the housing market will continue to experience boom-bust cycles, leaving destruction in their wake," the paper said."This destruction includes widespread evictions, mass unemployment, severe contractions in credit, depressed homeownership rates, and heightened impediments to wealth formation for minority and lower-income households."There are, of course, skeptics of credit-box expansion.
The real constraint for homeowners today, Calabria said, is finding a home in the first place. By some estimates, the US needsto absorb all the demand for homebuying. He added that expanding credit access would only introduce more buyers who'd then bid up existing homes, worsening the supply shortage.
Right now, as the economy is showing signs of weakness, standing pat and preserving the current credit box could help to prevent another extreme swing towards tightening lending standards in the future, McCoy said."I really push back against the idea that just knee-jerk relaxing credit standards is ultimately a solution," McCoy said.
jamie_rod your conclusions is illogical: “Low rates of foreclosure activity signal that housing lenders aren't taking enough risk”. Did you consider lenders have it just right? That’s what happens when BI makes Jr adults Sr “reporters”. Housing is a behavior problem silly. EQ
If prices would stop going up, the insurance would be a deposit of a certain amount and the people won't be tax at every corner, they would actually afford a house. The actual owners are the banks.